Gratuity accrual timing under Rule 11(ii) depends on retirement date, not earlier handover of charge.

Gratuity due to an employee under Rule 11(ii) becomes payable during the 12 months following retirement, so a retiree who left service on 31-3-1980 was treated as remaining in service until that date. On that basis, the gratuity became due only from 1-4-1980, and the earlier handing over of charge did not alter the timing. The amount was therefore taxable in the subsequent assessment year, 1981-82, and not in 1980-81.

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Issues: Whether the gratuity received by the assessee after retirement became due and payable on 1-4-1980 and was therefore taxable in the assessment year 1981-82 rather than the assessment year 1980-81.

Analysis: Rule 11(ii) provided that gratuity due to an employee shall be payable during the 12 months next following retirement. The assessee retired on 31-3-1980 and was deemed to remain in service till that date. The gratuity accordingly became due only from 1-4-1980, and the fact that charge was handed over earlier on 31-3-1980 did not affect the position. On that basis, the gratuity was held to fall in the subsequent assessment year.

Conclusion: The gratuity was taxable in the assessment year 1981-82 and not in the assessment year 1980-81, in favour of the assessee.

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